One of the world’s most popular music streaming services could be forced to shut down within a year, industry experts have warned.
Spotify, which offers free music streaming across PCs, Macs and iPhones, generates revenue by splicing advertisements between tracks.
And some top executives within the music industry think the business is not going to survive under its current model.
An unnamed “senior executive” at one of the big four music groups told The Times that Spotify “will be dead within a year if it carries on like this.”
Meanwhile, Napster senior marketing executive Dan Nash asked,
“Where is Spotify going to be a year from now with its free service? All these ad-supported models have burned out already; why is Spotify going to be any different?”
Spotify is, in fact, trying to shift away from its ad-supported free music model, offering a range of incentives for people to pay a monthly subscription.
Premium subscribers can listen to tracks ad-free, store as many as 3,333 tracks on their PC without going online, and can sync their music to the iPhone for music on the go. The service costs just £9.99 a month.
It is believed, however, that only ten per cent of the two million Spotify subscribers in the UK pay for the premium subscription.
Meanwhile, music groups continue to demand payment for each time their owned songs play on Spotify, a system that Spotify co-founder Daniel Ek wants labels to abandon.
"The industry needs to think outside of the box and realise that the new business model in music is a mix between ad-supported music, downloads, subscriptions, merchandising and ticketing where the user comes first and where the key to monetisation comes from portability and packaging access rights," wrote Ek in a blog post.
"I believe this is something that most people in the industry can agree to, but it can’t happen if the industry continues to enforce the per-play fees it has tried so hard to hold on to. The new model is about figuring out how to increase the revenue per user (RPU) between the different models – not squeeze as much as possible out of every single transaction."